Growing Pains for Google
One of my favorite VC lines is: “If your idea is so great, why doesn’t Amazon/EBay/Google/Microsoft/etc. just throw 20 developers at the problem and eat your lunch?” Rarely has something so stupid been uttered so often by so many.
The answer, of course, is that large companies, though blessed with vast resources, face huge challenges of their own. Scaling up an operation implies the addition of layers of middle management with the associated bureaucracy and inefficiency. It becomes harder and harder to innovate due to internal politics and fear of cannabilizing existing revenues. At some point it’s cheaper and easier for them to snap up a startup for a few dozen millions rather than try to develop ground-breaking technology in-house.
Microsoft has been exceptional at coping with these challenges, proving during the browser wars that they had kept their edge despite three decades of vertiginous growth. But even they are starting to feel the burden of their own bulk. Another fascinating example is Google. Since their IPO a few months ago, they have suffered a serious dent in their do-no-evil, do-no-wrong fascade. There have been outright blunders: the train wreck that is Orkut, the faulty Google Web Accelerator implementation. But more than anything, it just seems like ages since Google has done anything truly innovative.
(Funnily enough, I took a break here to have lunch, printing out a copy of “Hiring is Obsolete”, Paul Graham’s latest essay, to keep me company. It’s spookily on-topic with respect to this blog post. Although I don’t agree with all his conclusions, his explanation of why big companies can’t innovate is compelling.)
A least one VC gets it, in any case. In “The Starbucks of the Internet”, he provides some anecdotal evidence that Google is acquiring a lot of the negatives of a Starbucks or McDonald’s. With a brand the size of Mars, swelling revenues and soaring profits, it’s hard to be too doomy and gloomy about Google. But rest assured, there’s still plenty of the room for the little guy.
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